What if I told you the top performing asset management companies spend less money on maintenance and get better results from an operations perspective. Sounds too good to be true, right?
According to data from Solomon and Associates, this is absolutely the case. Solomon and Associates are the gold standard of benchmarking, particularly in the oil industry. 98% of the refineries in the world subscribe to the Solomon Study, and executives make decisions based on their standing in the Solomon ratings.
In their reliability and maintenance study from 2013, which surveyed hundreds of plants across nine industries, they found that:
Top performers spend an average of about 1.4% of the value of their assets on maintenance annually.
Poor performers spend 3.5 x more.
So if you were in a one-billion-dollar plant for example, a top quartile performer would be spending $14 million a year on maintenance, whereas a poor performer would be spending $47 million a year on maintenance.
Think about the competitive advantage you can gain from reducing the cost of maintenance. When you present a business case to an executive that suggests this kind of dramatic reduction in the cost of maintenance, they don’t believe it because it’s almost too good to be true. “How could it be? It’s impossible!” It’s not impossible and these statistics prove that.
Here’s a summary of the 2013 report which shows their findings:
Correlating Performance from an Operations Perspective
More importantly, I think, is the correlating performance from an operations perspective, because the top performers have better mechanical availability – see the statistic in the graphic above (96.7%, compared to 82.7%). This is a proxy for uptime. Keep in mind mechanical availability is defined as the time that the equipment is actually ready to perform when it’s asked to do so. In poor performers that extensive downtime for maintenance (which is avoidable) costs billions of dollars in revenue to companies every year.
Strategic Action is Key
Very importantly, the kind of action that gets taken to reduce costs is key. Don’t be fooled into thinking that simply slashing the maintenance budget means that your equipment is going to suddenly get reliable. It’s a matter of implementing and embracing the science and technology necessary to understand the condition of the equipment, the health of the asset so to speak, and then take corrective action accordingly; namely, only when the condition warrants. Top performers no longer perform traditional preventive maintenance on a set frequency whether the condition warrants or not. The preventive maintenance is done only when the condition warrants. This saves enormous amounts of unnecessary preventive maintenance, and that not only saves money but also eliminates the negative consequences of too much maintenance – namely unnecessary downtime. But remember, it’s not about cutting costs blindly. It’s about deploying the technology and the processes necessary to monitor the condition of the assets, looking for pre-determined trigger points which dictate some preventive maintenance is necessary. If the condition never appears, no maintenance is done.
About the Author
Bob DiStefano is widely regarded as one of the world’s foremost Asset Management thought leaders. He was formerly the VP and General Manager of Emerson Reliability Consulting. He has authored countless articles on reliability and asset management and a text book on Asset Data Integrity. Bob was the top rated speaker at Mainstream North America. Later this year, he has the honour of delivering the keynote at the American Society of Maintenance & Reliability Professionals (SMRP) Conference.